By: Economy Middle east

Gold prices continued its downward trajectory on Tuesday as the precious metal faced significant pressure from a combination of cooling geopolitical friction in Iran and Russia and a strengthening U.S. dollar. Market participants are currently maintaining a cautious stance as they anticipate the release of the minutes from the Federal Reserve‘s January FOMC meeting, which are scheduled to be made public later this week.

In early market activity, spot gold declined by 2.33 percent to reach $4,877.87 per ounce, a move that followed an even sharper intraday loss of 1 percent recorded earlier in the trading session. Similarly, U.S. gold futures designated for April delivery saw a notable decrease, falling 2.24 percent to settle at $4,902.39 per ounce.

Mirroring the international downturn, the local gold market in the UAE saw a widespread decline across all carats. The price for 24-carat gold dropped by AED12.50 to settle at AED589.50, while 22-carat gold decreased by AED11.50 to reach AED546.00. Similarly, 21-carat gold fell by AED11.00 to AED523.50, and 18-carat gold shed AED9.50 to trade at AED448.75. Completing the downward trend, 14-carat gold saw a reduction of AED7.25, bringing its price down to AED350.00.

Geopolitical developments and diplomatic talks

The shift in investor sentiment follows comments made by U.S. President Donald Trump on Monday, where he stated that he would be involved “indirectly” in talks between Iran and the U.S. regarding Tehran’s nuclear programme, which are set to take place this Tuesday in Geneva. During his remarks, the President added he believed Tehran wanted to make a deal. Simultaneously, the geopolitical landscape saw further signs of cooling as representatives of Ukraine and Russia are scheduled to convene in Geneva on Tuesday and Wednesday for a new round of U.S.-mediated peace talks. According to statements from the Kremlin, these specific discussions will likely focus on territory. These diplomatic efforts have reduced the immediate demand for safe-haven assets, contributing to the current retreat in bullion prices.

Currency impact and Fed expectations

Adding to the headwinds for gold, the U.S. dollar index climbed 0.2 percent against a basket of rival currencies, a move that effectively makes greenback-priced bullion more expensive for buyers utilizing other currencies. Beyond the currency fluctuations, the broader market is focused on the upcoming minutes of the Federal Reserve’s January meeting, due Wednesday, which investors are scouring for further clues about monetary policy going forward. At present, market expectations formulated via the CME’s FedWatch Tool suggest that the first interest rate cut is not anticipated until June. This timing is critical for the metal because non-yielding bullion tends to do well in low-interest-rate environments. 

Performance of other precious metals

The broader precious metals complex followed gold’s lead into negative territory during Tuesday’s session. Spot silver experienced a decline of 3.58 percent, bringing its price to $74.02 per ounce, though it showed some signs of stabilization after having dropped over 3 percent earlier in the day. Other industrial and investment metals also faced selling pressure, with spot platinum shedding 2.60 percent to trade at $1,989.00 per ounce. Meanwhile, palladium recorded the most significant percentage loss among its peers, falling 3.30 percent to reach a price of $1,671.00.